COSTING.DOC

COSTING HEALTH INTERVENTIONS FOR COST
EFFECTIVENESS ANALYSIS: A SUGGESTED
METHODOLOGY
Purna Chandra Dash1
Dr. Ramesh Durvasula2
1.0. Abstract:
A methodology for costing the health interventions for cost effectiveness analysis
is developed. In this method, instead of using the traditional approach of dividing the
costs into fixed and variable components, the costs are divided into three categories - the
new addition being "infrastructure cost". As an illustration to this methodology, various
cost components of secondary and tertiary level health infrastructure that are usually
necessary for any health intervention are listed and their monetary value computed. The
data used for the illustration pertains to year 1994-95. Since there has been a substantial
change in the cost of inputs, it is recommended that the figures given in this paper be
revised on the basis of recent cost data. It is suggested that similar methodology could be
adopted for costing the health interventions for other developing countries.
1.1. Introduction:
The concept of cost effectiveness analysis stems from the idea that the available
resources to the health sector are inadequate and therefore there is a need for using them
in an effective way so as to obtain maximum feasible output with minimum possible cost.
Being tasked with achieving a greater level of health outcome (say (DALY)3
of QALY),
most of the developing and developed countries have been trying to achieve their health
goals through cost effective ways of using their resources. Essentially, the cost
effectiveness analysis involves three steps: (1) selection of package of interventions for
different diseases, (2) listing the inputs and finding out their monetary values that are
required for the interventions to get going on, (3) measurement of the outcome of the
interventions in terms of some indicator, and (4) comparison the cost and outcome of one
intervention with that of the other so as to select the appropriate ones. Thus costing of
interventions constitutes a major task in the cost effectiveness analysis. This paper is an
attempt to develop a suitable methodology for costing the health interventions in the
developing countries in general and Andhra Pradesh in particular. The paper is organized
in the following lines:
1
Research Scholar, Department of Economics, University of Hyderabad, Hyderabad - 500 046
2
Chairman, Social Services Area, Administrative Staff College of India, Bella Vista, Hyderabad
3
Disability Adjusted Life Years (DALY) is used as a measure of health outcome in World Development
Report (1993).
1

In the first section we give a precise definition of health intervention and discuss
the basic concepts related to their costing. Next, we present the method of data collection
and estimation of costs. As an application of the concepts developed in section 1 and 2, in
the penultimate section, we attempt to develop a costing framework for AP.
1.2. Health intervention:
Adequate definition of intervention is important for accurate information of
resources required by it. Definition of intervention is based on the current knowledge of
the natural history of the disease(s) sought to be tackled and technological alternatives
available to deal with it (Phillips 1987)4
. The interventions may be targeted for the whole
population or to a specific group of people. For example, health education for AIDS is
intended for the whole population, whereas, screening and treatment of cervix cancer is
targeted for the females within the age group of 20-64. So the persons covered by the
intervention (PCI) is different for both the interventions and therefore the resource
requirements.
The next step in costing is to elaborate the definition by detailing the components
that comprise the intervention so that these can be costed. This could be done through a
typical course of events (TCE)5
. TCE takes up the sub-population with which it is
concerned to start with. For example, an intervention consisting of surveillance, the size
of the sub-population would be the starting point. If it is active surveillance involving
both sexes and all age groups, then the starting population is total population. The manner
in which the starting populations get classified in the course of interaction with the
intervention system is then traced. Each stream of population is traced till the association
with the intervention system ends either due to cure, death or any other limitation in the
mandate of the particular intervention. The TCE pattern diagram looks like the decision
tree given in Appendix 1.
1.3. Costing of health interventions: concepts
The costing framework developed in this study differs from the traditional costing
in a sense that, in this framework we have added a new category of cost called
4
Phillips, M. A. (1987), Why do costings?, Health Policy and Planning, 2(3): 255-57.
5
Typical course of events (TCE) for an intervention is essentially a graphical representation of the clinical
Epidemology of disease(s) covered by it. The graphical representation looks like a decision tree. This
approach assumes a reference population and describes in quantitative terms the course of expected events
relevant to the concerned intervention.
2

"infrastructure cost" in addition to the traditionally define fixed and variable cost. Thus
the costs are divided into three categories, i.e., infrastructure cost, programme fixed cost,
and programme variable cost
1.3.1. Infrastructure cost:
By health service infrastructure we mean network of institutions and services,
which exist irrespective of any particular programme or intervention. These include the
infrastructure available at different level of facilities like Primary Health Center (PHC),
Secondary Level Hospitals and Tertiary Level Hospitals, which are directly or indirectly
used for patient care. These infrastructures produce different kind of services such as
household visits by health workers, outpatient consultations, diagnosis and laboratory
services, hospitalization, surgeries, specialist consultation etc. The unit of measurement of
this cost category is "persons covered under the intervention" (PCI)6
. From the point of
view of microeconomics theory, these infrastructure services look like fixed cost. But the
unit of measurement, PCI, gives a feeling that it is a variable cost. This is indeed a fixed
cost measured like a variable cost. The assumption here is that the state would build up
and maintain the infrastructure for treatment and prevention even though a particular
intervention is not adopted. The state would select a package of interventions according to
its requirements. Cost of all the facilities available at above levels are included under
infrastructure, although some of the inputs under this category seem to be fixed7
.
1.3.2. Programme fixed cost:
In addition to the demands made on general health infrastructure, most
interventions (programs) would require the resources of nature that are not produced by
the general health infrastructure. Intervention specific fixed costs are usually on account
of techno-managerial outfits to plan, execute, monitor, and evaluate the programme. For
example, district TB centers are required to manage short course chemotherapy for TB
6
By PCI we mean the population at risk. The population at risk is defined as the population within certain
age groups who are most likely to get the disease. For example population at risk for cervix cancer are
females between the age group 20-54 years. This information could be collected from the health officials /
epidemiologists who has fairly good knowledge about the disease pattern in the area concerned under the
study. In our study we have collected this information through focus group discussion. The cost of PCI is
calculated by; first, finding out the cost of treating / preventing one person from the disease under study;
second, multiplying it by the population under risk in order to find out the total cost of covering the
population under risk.
7
It includes the cost of building and maintenance of the infrastructure. Therefore, these costs need not be
included within the category of fixed cost, which is a separate category in our analysis. This avoids the
problem of double calculation of different inputs.
3

programme and to check samples of sputum slides, examined by regular health
infrastructure, for its validity and identify the refresher training of lab technicians in
examination of sputum slides. These fixed costs are known as programme specific fixed
cost. These are the fixed investments needed for the programme get going irrespective the
number of persons receiving the intervention. These include the cost of equipment,
personnel at different levels and annual capital. Though these types of cost do not
increase with the number of persons covered in any intervention, it increases with the
coverage of more area. For example the programme fixed cost at the district level depend
upon the number of district covered under the intervention. Hence the estimates could be
made for one typical health district and not the state. This may facilitate the total resource
requirement depending upon the coverage of districts.
Thus the programme fixed costs include the cost exclusively needed for an
intervention. In other words, if the programme were not there these costs would not have
been incurred.
1.3.3. Programme variable cost:
Programme variable cost covers the recurring expenses such as medicines,
consumables and other supplies and basically linked to the extent of utilization of
services. If number of persons covered under the intervention increases, then the
programme variable cost tends to increase. These costs could be expressed in terms of
PCI.
1.4. Efficiency and estimation of cost:
As noted in Section 1.0 a major part of the fixed cost required by any intervention
is measured in terms of infrastructure services. The quantum of infrastructure required for
intervention is a function of the complexity of activity, efficiency of the firms in
producing the service and the unit of measurement of service. The information about the
complexity of activity could be collected through expert's opinion in various
brainstorming sessions (discussed later). As a matter of fact, the level of technical
efficiency in the production of infrastructure services influences the cost of infrastructure
to a large extent. Therefore it is necessary to address this issue while costing the
interventions. One of the possible ways to address this issue is to divide the infrastructure
4

requirement on the basis of their unit of measurement and discuss the issue of efficiency
in that context:
1. Services measured by discrete numbers: The services such as laboratory test, x-
rays, household visits, camp contacts, outpatient consultations etc. are generally
measured in discrete numbers. The costing of any intervention could be made on
the basis of the information collected from the experts whether a particular service
is required or not at each juncture of the TCE8
flow diagram, and if required, how
many units would be required per case. On the basis of information on how many
persons require it the total cost may be arrived at. It is at this point that the issue of
efficiency comes in to the picture. The decision makers need to consider whether
or not the existing infrastructure will be able to produce it. Furthermore, if the
existing infrastructure could produce the necessary services, how efficiently it
would be able to do it? If there is efficient use of resources then the total cost of
the intervention may come down.
2. Services measured by active duration: Some infrastructure services required by
the interventions are measured in units of time for a well-defined activity. These
services are full activities by definition. Examples of such services are; operation
theatre time for surgery, doctors' time, specialist's time, equipment time, etc.
These services are usually measured in terms of hours per person covered by the
intervention. The estimate of such requirement is made by direct observation or
expert opinion. The information obtained though direct observation may be an
underestimate of the true time required for these activities. The results from time
and motion study may change from institution to institution in a sense that the
institutions operating inefficiently may require more time for any of these
activities than that of an efficiently run institution. Therefore, the expert opinion
on the time required for these services may give a fairly good picture.
3. Services measured by passive duration: These services are closely monitored
activities that may not be classified as a full activity as definition as is the case for
the services measured by active duration. A classic example of such service is bed
days. One bed day usually involves hoteling, nursing and basic clinical services
8
TCE refers to typical course of events.
5

provided to the patient which are generally closely monitored activities. In this
case the scope of efficiency is slack in the sense that the treatment regimen
adopted by the physicians and others may modify the length of stay to a large
extent. Therefore, the information collected through time and motion study may
not reflect an accurate picture and sometimes the information collected from an
inefficiently run hospital may overestimate the hospital bed days required for
selected package of interventions. This problem, to a large extent, could be solved
through expert opinion.
1.5. Data:
The cost data could be collected from the following sources:
(a) Programme experience: The experience on the existing programs may give fairly
good information on actual resource required for any intervention. Though the
definition of intervention that is taken for any cost effectiveness analysis may not
match exactly with the existing health programs, there is bound to be a lot of
overlap.
(b) Rapid assessment: Information on average length of stay, time required for
surgery, diagnosis etc. could be collected through a rapid assessment survey.
(c) Expert opinion: Where it is not possible to collect the information through
programme experience or rapid assessment, the next best alternative is expert
opinion. In fact, for some cost items the expert opinion can give fairly good
information than that of other two sources.
However, it may be pointed out that costing of an intervention require information on
how much of each of the cost components is required for the intervention get going on?
This information could be collected from the above three sources. For example,
programme experience would help us knowing the number of bed days, outpatient
contacts, etc. that are required by an intervention. But it does not give any information on
the cost of individual components. In what follows, below we have tried to investigate
each individual cost component in detail.
1.6. Costing infrastructure:
6

The infrastructure required for an intervention could be from various levels (i.e.,
outreach, sub-center, primary health center, secondary level hospitals, tertiary level
hospitals, specialty hospitals etc.). As the cost of infrastructure varies from level to level,
there is a need for clear indication of the category of infrastructure that is needed at each
stage of TCE for an intervention. Say, for example, short course chemotherapy for
sputum positives and long course chemotherapy for sputum negatives for tuberculosis. In
this case the TCE tree starts from screening the symptomatic cases at the beginning to the
hospitalization of complicated cases at the end. At the first stage of this intervention there
is screening of symptomatic cases. The infrastructure needed is usually from outreach
level. If, during cost calculation, one includes the services from higher level, obviously,
the cost is likely to be overestimated. Likewise, the complicated TB cases need to be
managed at a district hospital. In turn, if their treatment is accounted for at community
hospital level, then the cost is likely to be underestimated. It is therefore necessary to take
these things into consideration while calculating the resource requirement for any
intervention. The requirement of appropriate infrastructure at appropriate point of TCE
could be collected form the disease experts.
The health infrastructure in AP consists of outreach services, sub-centers, primary
health centers, secondary hospitals (i.e., community, area and district hospitals) and
tertiary hospitals (i.e., teaching hospitals and specialty hospitals). The cost of the same
infrastructure differs between levels as well as across the hospitals. Therefore, there is a
need to calculate the cost of the infrastructures at different levels.
1.6.1. Manpower:
Manpower that is involved in the production of different services by the health
infrastructure is mostly doctors, paramedical staff, nurses and other supporting staff. The
procedure of calculating the cost of manpower is as follows:
1. Since there are different categories of staff with varying time experiences, it is
usually difficult to calculate the cost of this component individually. One way to
solve the problem is to take the monthly mean salary of each category of staff
(say, doctors, nurses, paramedical etc.) and disaggregate it to the respective unit of
expression. The monthly salary could be obtained by adding the minimum and
7

maximum salary of each category of staff and dividing it by 2 i.e.,[(Max +
Min)/2].
2. As we need to find out the costs according to the level of infrastructure, the
number of different categories of staff at different levels needs to be listed. In
order to find out the monthly cost of each category of staff at different
infrastructure, we need to multiply the number of staff at each level of
infrastructure with their respective mean salaries. The cost per day and hour could
be obtained by dividing the monthly cost with the number of working days and
working hours respectively.
3. As the staffs are engaged for different activities, we need to allocate their time on
the basis of their activities. For example, a resident medical officer spends a part
of his time on patient care and some on administrative activities. Similarly the
salary of other category of staff can be divided on the basis of time spent on
different activities. Therefore the monetary values of the time spent for different
activities in a day could be arrived at on the basis of percentage of time they
devote for different activities. If, for example a nurse spends 60% of her time per
day for inpatient care, then 60% of her per day salary needs to be allocated for that
activity. In order to arrive at their contribution to the cost per unit of service, (say,
bed day or OP contact) the salary per day need to be divided by number of beds or
number of outpatient treated in the hospital9
. (Appendix 1).
1.6.2. Capital component of infrastructure:
The capital component of the infrastructure mostly consists of building and
equipments. Since it is impossible to take all individual equipments and find out the cost,
there is a need to divide the instruments into different categories. The equipments
available in health infrastructure are usually divided into; (a) imaging equipment, (b)
electro-medical equipment, (c) pneumatic, hydraulic and sterilisation equipment, (d)
laboratory equipment, (e) hospital plant equipment, (f) administrative equipment,
9
For example, let the mean salary of staff nurse is Rs.1000. If there are 3 nurses in the hospital, then the
total cost of staff nurse is 1000x3=Rs.3000. Assuming that they work for 30 days in a month, their per day
cost is Rs.100 (i.e., 3000/10). If 60% of their time is spent on IP care and 40% on OP care, then their cost
contribution for IPs is Rs.60 and for OPs Rs.40. In order to expresses the cost of their time in terms of
services provided by the infrastructure, say, OP contact or IP day, we need to divide their contribution by
number of beds available in the hospital and number of OPs attended the clinic per day respectively.
8

(surgical equipment pack, (g) minor equipment and furnishing, (h) furnishing and other
hospital equipment. The first step is to make the list of equipment and assign them to
these categories. The cost could be arrived for each category of equipment in the
following way:
1. Under each category of equipment there are several instruments. In order to arrive
at the cost of each category of equipment, we need to make a list of instruments
under each category and multiply them with their respective prices and add them
up. This gives us the cost of that category of equipment. Similar procedure could
be followed for other categories equipments also. For example, if there are 'm'
category of equipment within a hospital and there are 'n' types of instrument in
each category of equipment, then the array of instruments would appear in the
following manner:
E1=(e11, e12, e13, …, e1n)
E2=(e21,e22, e23,…,e2n)
……………………….
……………………….
Em= (em1, em2, em3,…, emn)
Where, and eij, represents jth
type of instrument within ith
category of equipment
for i = 1, 2, …,m and j = 1, 2, …, n. If pij represents the price vector for the same,
then the cost of equipment category 'i' ( CEi) equals: CEi = eij pij'.
2. Next step is to calculate the annual cost of each category of equipment separately.
We do this dividing the cost of each instrument within each category by the life
expectancy of each of them and adding them together. Annual cost of ith
category
of equipment (ACEi) equals: ACEi = (eij pij')/(LEij), where, LEij is the life
expectancy of instrument 'j' within ith
category.
3. Cost per day = ACEi / 365 (assuming that the equipments are used throughout the
year)
4. Cost per Hour = Cost per day / Number of hours the equipment functions
1.6.3. Cost of building space:
1. Determine the cost of constructing the buildings (Different bedded separately).
This could usually be collected from the Health Infrastructure Development
9

Corporations (HIDC) of different states. Another way of gathering the information
may be to collect data on construction norms, i.e., the space required for one bed
(in squire feet) and the cost per squire feet. On the basis of this norm one can
arrive at the cost of total space required by a hospital10
.
2. In case the information on the cost of the building is available from HIDC, one
can obtain the information on the space occupied by different service areas from
the same source and allocate the cost components accordingly. If the cost of the
building is, say C, and there are x1, x2, x3,…, xn service areas occupying s1, s2, s3, …, sn
squire feet of space respectively, then the cost per square feet (Csf) would be:
(Csf) = C / ( s1+s2+s3, …,+sn)
3. Cost per squire feet per year (Csfy) may be obtained by dividing the cost per squire
feet by life expectancy (LE) of the building: i.e., Csfy = Csf / LE.
4. The cost per squire feet per day = (Csfy / 365 days).
5. It may be pointed out that the services produced by the hospitals are mostly for
IPs and OPs11
. Therefore, the cost of the building may be allocated between these
two components only.
In the following table (Table 1) we give a list of infrastructure services that are commonly
required for any intervention and their units of expression. On the basis of this table
infrastructure requirements for any intervention could be arrived at.
10
It may be pointed out that the usually the building space consists of the space for patient care (IP and OP)
for administration, investigation rooms, operation theatre etc. As already pointed out that the cost of
administration is included within the category of fixed cost. Therefore, the building space occupied by the
administration need to be included within the fixed cost. In case the information is not available separately,
one may divide the whole building on the basis of service area and find out the space occupied by each
service area. Them the space occupied by the administration may be equally divided among the service
areas.
11
Though there are other service produced by the hospitals, it may be pointed out that these services are
mostly for IP or OP care. Since it is practically difficult to allocate the cost of building for each and every
service individually, it is not inappropriate to allocate the total cost of building space for IP and OP care
only.
10

Table 1: Components of infrastructure services and their units of measurement:
Hospitals (secondary and
higher levels)
Primary health centers Outreach services
Services Units Services Units Services Units
Bed day Number OP contact Number Visit by HW Number
OP contact Number Lab I test Number Immunization
contact by HW
Number
Lab I test Number X-ray Number Camp contact by
HW
Number
Lab II test Number Doctor's time Hours Contact by AW Number
X-ray type test Number Vehicle running Km.
Specialist time Hours
Vehicle running Km.
HW: Health workers (female and male)
AW: Anganawadi workers.
1.7. Costing fixed cost:
As already mentioned, the fixed costs are usually the costs due to techno-
managerial outfits to plan, execute, monitor, and evaluate the programme. The typical
example is district TB offices, which are exclusively engaged in such activities relating to
tuberculosis control programme. In addition, at hospital level, there are some staffs those
who devote some part of their time for these activities. The cost of their services can be
called as semi fixed cost. Thus, the fixed cost components include both semi-fixed and
fixed cost. The units of expression for these services are same. The components of this
cost could be calculated in the similar fashion as infrastructure cost. Table 2 gives the he
components included under program fixed and semi-fixed cost and their units of
measurement:
Table 2: Components fixed and semi fixed cost and units:
Programme fixed cost components at different levels
Hospitals (secondary and higher levels) Primary health centers
Services Units Services Units
Managerial time Hours Managerial time Hours
Technical staff time Hours Technical staff time Hours
Building Cost/sq ft Building Cost/sq ft
Equipment Rupees Equipment Rupees
Operational cost Rupees Operational cost Rupees
Traveling allowance Rupees Traveling allowance Rupees
1.8. Costing variable cost component:
11

Programme variable cost usually includes the recurring expenses such as drugs
and therapeutics, casual labor etc. The unit of measurement is usually rupees. As the
persons covered under the intervention increases, this cost component also increases. The
amount involved for this component could be found out from TCE tree. At each point of
TCE tree, one need to calculate the cost components individually for one person, and the
total resource required could be arrived at by multiplying by the number of persons
entering at that branch of TCE tree.
1.9. Costing of health infrastructure:
1.9.1. Secondary level health services:
As an illustration of the concepts developed in the preceding sections, in this
section, we have made an attempt to find out the cost of infrastructure services at
secondary and tertiary level hospitals in Andhra Pradesh. The secondary level health
infrastructure in AP consists of Community hospitals (30-50bedded), Area hospitals (50-
100 bedded), District hospitals (200+ bedded) and some specialty hospitals such as
Pediatric hospitals, Maternity hospitals etc. and dispensaries. As already pointed out, the
costs of services vary from hospital to hospital depending on the bed strength. Therefore,
we have calculated the cost of various services at different bedded hospitals. We calculate
the cost of infrastructure service components given in Table 1.
Cost of bed day and outpatient (OP) contact: The cost components included under a
bed day are; manpower, equipment and building space. For calculating the cost of
manpower, we collected the information on the approved staff for different bedded
hospitals, and their salaries from the Commissionerate of secondary level health services.
The costs per unit of service were calculated on the basis of time allocated by them for
different services. We followed the method given in section 1.6.1 to arrive at cost per day.
As the staffs of a hospital are engaged for IP as well as OP care, we have allocated 80%
of their time for IP care and 20% for OP on the basis of which the man power cost per
bed day and OP contact are calculated12
(Appendix -1).
12
The number of bed days in a hospital is equal to number of beds. Although, the bed occupancy may not
be 100%, the point here is to calculate the number of bed days available at the infrastructure. As per OP
contact, we have followed the procedure of 1:4 i.e., one bed day equals to 4 OP contact. This proportion is
estimate by using a cost function for secondary level hospitals in AP (Dash 1999). This procedure is
followed for apportion the cost of manpower, equipment components between IP and OP.
12

So far as the cost calculation for the equipment13
component is concerned, we
followed the same method as is given in section 1.6.2. The costs of these equipments are
given in Table 1 and 2.
Table I: Cost of different equipments included in one IP day and OP contact
Bedded
hospitals
Furnishing
& hospital
Equipment
Minor
Equipment
and
furnishing
Administrati
ve
Equipment
Hospital
plant
(Generator
etc.)
Refrigerato
r and AC
IP OP IP OP IP OP IP OP IP OP
30 CH 4.04 0.25 1.31 0.08 0.19 0.012 1.24 0.08 1.19 0.07
50 CH 2.42 0.15 0.78 0.05 0.12 0.007 0.75 0.05 0.71 0.04
100 AH 3.82 0.24 0.81 0.05 0.40 0.025 0.59 0.04 0.96 0.06
200 DH 4.54 0.28 0.85 0.05 0.52 0.032 0.42 0.03 0.76 0.05
250 DH 3.63 0.23 0.68 0.04 0.41 0.026 0.33 0.02 0.6 0.04
300 + DH 2.79 0.17 0.53 0.03 0.32 0.02 0.26 0.02 0.46 0.03
50 MCH 2.42 0.15 0.80 0.05 0.12 0.007 0.75 0.05 0.71 0.04
100 MCH 3.82 0.24 0.82 0.05 0.40 0.025 0.59 0.04 0.98 0.08
50
pediatrics
2.42 0.15 0.80 0.05 0.12 0.007 0.75 0.05 0.71 0.04
By following the procedure given in section 1.6.3 we have calculated the cost of
the space occupied by bed for different bedded secondary level hospitals. For this, the
total space occupied by the hospital was collected and was divided by the number of
beds14
. The results are presented in Appendix II. The cost of medicines and other
recurrent cost components could be accounted for depending on the type of disease,
severity etc and could be added to the infrastructure cost components of IP day and OP
contact. However, it is practically impossible to take this information during the unit cost
calculation. One way to solve this problem is to use aggregate information on recurrent
expenditure from budget books / audit reports. This gives the recurrent cost per year. Cost
per bed day and OP contact could be arrived at by appropriate multiplication and division
13
Though it could be argued that within hospital infrastructure there are some cost components such as cost
of administration and monitoring etc., which should be included within the category of programme, fixed
cost, for the present exercise it is assumed that there is no programme fixed cost which are involved at
hospital level. Accordingly, the costs of those components are included within bed day or OP contact. We
have assumed that 80% of these equipments time are devoted for IP day and 20% for OP contact.
14
It sounds unrealistic to include the space occupied by different departments (i.e., administration,
laboratory, OP clinic, Pharmacy etc.) within the bed days. As majority of these services are utilised by the
IPs it may not be unrealistic to include the cost of building space of these service components within the
hospital within the bed days.
13

after allocating the total recurrent expenditure between inpatients and outpatients15
. For
ready reference, Appendix IV gives a list of the recurrent cost components (except drugs
and therapeutics) and their monetary value for 14000 beds16
.
Level I Test and Level II test:
As per information from the hospitals, the labs work for 8 hours for all categories of
hospitals. A consensus from the experts about the time required for Level I, Level II, X-
ray type tests give us the information that it usually takes 10, 20, and 20 minutes
respectively for each type test to complete. Therefore the cost of equipment and
manpower time for 10 and 20 minutes is accounted for in the calculation. It is also
assumed that 80%, 60% and 10% of the lab equipment time is used at CH, AH and DH
respectively, for level I test and 20%, 10%, 90% of the lab equipment time is used for
Level II test (Appendix III, Table 2)17
. The unit cost of these services could be calculated
by adding the recurrent cost components such as chemicals, X-ray films etc. to the
infrastructure cost. (Table 3)
Operational cost of secondary level hospitals: These costs mostly include the recurrent
Expenditure of the hospitals. No detailed information is available in this regard except the
cost for the total 14000 beds per year. One can easily derive the cost per day. The same
table can be used for secondary as well as tertiary level hospitals.
All these information is given for 14000 beds. To find out one bed cost, divide the total
cost separately by the number of beds. This cost are to be filled up in programme variable
cost.
15
Cost per bed day = [Proportion of annual expenditure on IPs / (365× Total number of beds)]
16
This information was collected from the Andhra Pradesh First Referral Health Systems Project
(APFRHSP) report.
17
It may be noted that the costs of manpower for the maintenance of equipments are included in the cost of
bed day. But the machinery workshops containing various equipments for repairing are excluded here. This
decision was taken by taking into account the small component of the maintenance cost, which is reflected
in government health expenditure data. Ignoring such a small component may not be a problem in this
context. However, it is suggested that this component should be taken into account where the maintenance
cost is considerably high. In that case one need to collect information on annual maintenance cost from the
budget books / audited records and arrive at unit cost figures.
14

Table 2: Cost of various infrastructure components for secondary level hospitals in AP*:
Cost components Cost
per one
IP day
Cost per
one OP
contact
Cost per
Level I
test
Cost per
Level II
test
Cost per
X-ray
OT
(staff)
30 bedded CH
Manpower 47.52 1.38 7.25 18.98 38.98
Furnishing and Hosp.
Eqpt.
4.04 0.25
Bld. Space 4.53
Minor Eqpt. & Furnishing 1.32
Hosp. Plant 1.24
Refrigerator & AC 1.19 0.07
Lab Eqpt. 0.24 0.48 3.88
Administrative Eqpt. 0.2
Total 60.04 1.7 7.49 19.46 42.86
50 bedded CH
Manpower 46.84 1.49 7.25 18.98 38.98
Eqpt.
2.42 0.15
Bld. Space 3.76
Minor Eqpt. & Furnishing 0.79 0.05
Hosp. Plant 1.24 0.07
Lab Eqpt. 0.24 0.48 3.88
Administrative Eqpt. 0.11 0.01
Total 55.87 1.81 7.49 19.46 42.86
100 bedded AH
Manpower 46.12 1.28 9.00 18.00 38.98 10.52
Eqpt.
3.82 0.24
Bld. Space 5.42
Lab Eqpt. 0.69 1.39 21.24
Total 58.13 1.7 9.69 19.39 60.22 10.52
200 bedded DH
Manpower 75.18 11.51 14.95 29.9 44.07 10.52
Eqpt.
4.53 0.28
Bld. Space 4.79
Lab Eqpt. 1.26 2.53 25.00
Total 87.05 11.95 16.21 32.43 69.07 10.52
15

per one
IP day
Cost per
one OP
contact
Cost per
Level I
test
Cost per
Level II
test
Cost per
X-ray
OT
(staff)
250 bedded DH
Manpower 74.88 12.56 14.95 29.9 44.07 10.52
Eqpt.
3.63 0.23
Bld. Space 4.36
Lab Eqpt. 1.26 2.53 25.00
Total 84.89 12.92 16.21 32.43 69.07 10.52
300 + bedded DH
Manpower 70.94 7.7 14.95 29.9 44.07 10.52
Eqpt.
2.79 0.17
Bld. Space 3.91
Lab Eqpt. 1.26 2.53 25.00
Total 79.21 7.97 16.21 32.43 69.07 10.52
50 bedded MCH
Manpower 50.04 2.29 11.4 22.81 38.98
Eqpt.
2.42 0.15
Bld. Space 4.29
Lab Eqpt. 0.24 0.48 3.88
Total 68.12 2.58 11.64 23.29 42.86
100 bedded DH
Manpower 59.63 2.24 16.06 32.11 38.98
Eqpt.
3.82 0.24
Bld. Space 4.3
Lab Eqpt. 0.90 1.39 21.24
Total 70.54 2.67 16.96 33.5 60.22 10.52
50 bedded pediatrics
Manpower 54.44 1.85 9.65 19.3 38.98
16

per one
IP day
Cost per
one OP
contact
Cost per
Level I
test
Cost per
Level II
test
Cost per
X-ray
OT
(staff)
Eqpt.
2.42 0.15
Bld. Space 3.68
Lab Eqpt. 0.69 1.39 3.88
Total 62.91 2.28 10.34 20.69 42.86
*Figures are rounded up to two decimal places
Table 3: Cost of specialists' equipment in secondary level hospitals (Cost per hour)
Types of equipment Hospital category
Community hospitals Area hospitals District
hospitals
Cardiologist equipment 0.19 1.15 2.63
ENT equipment 0 0 0.97
Ophthalmic equipment 0 0.49 0.66
Baby (New born) 0 0.75 1.43
AMC 0.23 0.46 4.39
GE 0 0.022 2.31
General OT 1.11 8.12 29.77
Table 4: Cost of surgical equipment pack (Cost per hour)
Type of packs Hospital category
Community hospitals Area hospitals District
hospitals
Gynecology 1.17 2.17 3.9
General surgery 0.36 0.84 1.01
Orthopedic 0 0 0.71
Ophthalmic 0 1.99 4.23
ENT 0.02 0.69 4.23
Anesthesia 0.09 0.41 0.5
Dental 0.17 0.17 0.34
17

Table 5: Other types of equipments usually in the operation theatre (i.e., pneumatic,
hydraulic and sterilisation equipment) and vehicles time (Cost per hour)
Pneumatic, Hydraulic and Sterilisation equipment (PHSE)
Equipment Hospital type
Community hospital Area
hospital
District hospital
PHSE 7.95 8.58 13.44
Vehicle types (cost per hour)
Ambulances 3.99 3.99 7.99
Pick up zeeps 3.42 0.00 3.42
Total Vehicle cost 7.42 3.99 11.42
Table 6: Cost of specialist's time (per hour)
Specialist category Cost per hour
Civil surgeon specialist (medicine, surgery, obst. &
gynecology, Pediatrics, Anesthesia, Orthopedics,
Ophthalmology, Cardiology, Pathology, Radiology etc.)
34.54
Civil surgeon RMO 34.54
Deputy civil surgeons 31.49
Deputy dental surgeon 31.49
Civil asst. surgeon (medicine, surgery, obst. & gynecology,
Pediatrics, Anesthesia, Orthopedics, Ophthalmology,
Cardiology, Pathology, Radiology etc.)
28.97
1.9.2. Costing of tertiary health structure:
IP day and OP Contact
In order to have some idea about the type of infrastructure at tertiary level health
services, a survey was conducted in Gandhi hospital, Secundrabad. Based on the
information obtained from the survey we arrive at the unit cost of different components.
The components are; bed day, OP contact, OT Hour, Level I test, Level II test etc. The
costing procedure for the tertiary level hospital is same as secondary level hospitals with
the exception that in case of tertiary level hospitals the costs are given department wise
(Appendix 6).
18

In Appendix 6, the costs of staff included under category 'staff other than doctor'
include the cost of nursing labour only. Similar method, as was followed for secondary
level hospitals, is followed to calculate the cost of other infrastructure components18
such
as building space and equipments.
Surgical Equipment Packs:
Specialists Equipments In Hours:
Cost of specialist's equipment time has already been included in the Bed day and
OP contact. This has been done so because most of the specialists' equipments are
available in the words. We present the table for which the cost of specialists' equipment is
not included under Bed day or OP contact (Table 6). Hourly cost of the specialists whose
time has already been included in the bed day and OP contact cost is given in Appendix
IV.
Table 6: Cost (Rs.) of equipment time (in hours) used in operation theatre:
Department Cost per hour
General operation theatre 46.72
Dental 16.75
ENT 17.65
ENT operation theatre (OT) 2.24
Ophthalmology OT 2.67
Urology OT 34.25
Gynecology19
OT 3.48
ICCU (OT equipment) 378.42
Table 7: Cost (in Rs.) of surgical equipment packs per hour
18
We follow the percentage method i.e., percentage of time spent per day for IP and OP care depending
upon the categories of staff. For Example certain nurses are exclusively meant for IP care where as, some
are for IP and OP. For the nurses whose time is used for IP as well as OP we assume that they spent 90% of
their time IP and 10% on OP. For other staff categories who are not directly involved in IP care we
followed following time allocation pattern: security guards (100% IP), other clerical and official staffs who
work for IP and OP (90% IP, 10% OP), drivers and cleaners (90% IP, 10% OP), Dhobi, Mali and
Electrician (90% IP, 10% OP), Cooks (100% IP), Pharmacist and Refractionist (90% IP, 10% OP), Staffs
on power supply (90% IP, 10% OP). Since these category of staff are not available department wise, in
order to include the cost of their time
19
For gynecology department we not only include the hourly cost of equipments used for operation, but
also the hourly cost of examination room and observation room are included within it.
19

Surgical equipment packs Cost per hour (in Rs.)
Gynecology 5.08
General surgery 4.2
Orthopedic 2.7
Ophthalmology 4.89
ENT 15.78
Anesthesia 2.05
Orthopedic 2.73
Dental 0.34
Table 8: Cost of specialist equipment not included in IP day or OP contact:
Department Equipment cost per hour
Neonatal equipment 166.54
Enema room 0.11
Specialists Time:
In almost all the departments the specialists are Professors and Asst. Professors.
Their salary is same for all the departments. In addition there are specialists in ICCU also.
The results have been given in Table XIII.
Table 9: Cost (in Rs.) of specialists' time:
Specialists Cost per hour
Professors of all departments 34.54
Asst. professors of all departments 26.97
Medical officer ICCU 26.92
Method of Calculating OT hour time:
Cost of operation theatre per one hour can be calculated by the following method.
Cost of One Hour OT time = (Cost of General Equipments in an OT + Cost of the Special
Equipments Necessary For the type of Operation to be Conducted + Cost of Specialists
Time + Cost of other Staffs Associated with OT). All costs are to be expressed in terms of
hours. The same method can be applied for secondary as well as tertiary hospitals. Cost of
building space need not be included here because we have assumed that one bed occupies
400 sq. feet of space and have included it under bed day cost.
20

Vehicle Hours:
There are 2 ambulances and 1 zeep in a tertiary level hospital. Assuming that the
life expectancy of the vehicles to be 10 years and working hours as 24 hours following
are the hourly cost of vehicles available in a tertiary level hospital.
Table 10: Vehicle cost (Rs) per hour
Type of vehicle Cost per hour
Ambulance 7.99
Zeep 3.42
Appendix 1: Calculation of Manpower Component of Bed day and OP Contact:
1. First find out the persons involved in IP as well as OP care.
2. Obtain the salary of each category of staff.
3. Find out the percentage of time devoted for IP and OP care.
4. Multiply the cost per day by percentage of time towards IP and OP care for
finding out the total cost of the time devoted.
5. Next divide the cost per day devoted towards IP by number of beds of the
category of hospital under consideration for finding out the manpower cost of the
bed day
6. Divide the cost per day devoted towards OP by 4 times the number of beds of the
category of hospital under consideration for finding out manpower component per
OP contact.
As a whole: Salary for IP day for a particular category of staff = {(Mean salary) X (Total
number of staff of the category) / 26] / Number of beds under the category of hospital]
For OP contact we follow the same procedure with the exception that the denominator is
multiplied by 4 because we assume that in a hospital the number of OPs per days would
be 4 times than that of number of beds.
1. In our study we have included manpower time (except doctors), furnishing and
other hospital equipment, building space for the hospital, minor equipment and
furnishing, hospital plant and machineries, refrigerator and air conditioner and
administrative equipments (All these are expressed per bed /day cost). This is
because we feel that these equipments are used for inpatients as well as outpatient
care so the cost of these equipments need to be included in bed days as well as OP
contacts.
2. Cost of time spend on X-ray, Level I and Level II test: For X-ray we have taken
cost of 20 minutes time, for level I test cost of 10 minutes time and for level II test
we have taken cost of 20 minutes time of the machines as well as the manpower
involved in doing such activities. For level I. Level II and X-Ray type test Rs.5,
10 and 30 are added respectively for other materials such as chemicals necessary
for different type of tests and X-rays.
21

3. Operation theatre time has been expressed in terms cost per one hour. It is found
out by adding the components such as one hour time of: machinery inside the
general OT and surgical equipment packs necessary for various type of surgery,
specific surgeon undertaking the operation and other persons of the persons
attached to OT.
Appendix - 1:
Here we give a detailed outline of the manpower costs that are involved in production
of various services (excluding doctor / specialist's time). The list given here is based on
the information from Commissionerate of secondary level health services.
1. Persons directly involved in IP, OP and OT activities: Nursing superintendent,
Head nurse, Nursing orderly, ANM etc.
2. Laboratory staffs who are involved in Level I and Level II: Pharmacist
superintendent, Pharmacist Grade I and II, Dental lab technician, Junior analyst,
Lab technicians, Lab attendants.
3. Staffs involved in X-ray type tests: Radiographer, Dark room assistant,
Refractionist, etc.
4. Staffs involved in operation theatre: Theatre assistant, stretcher bearer
5. Clerical staffs indirectly involved in IP and OP care: Electrician, Lay secretary,
Office superintendent, Bio-statistician, Junior Asst., Typist, Data processing
officer, Telephone operator, Record Asst., Office attender etc.
6. Other persons who are directly or indirectly involved in IP and OP care: Cooks,
Dhobi, Mali, Plumber, Carpenter, Mechanic, Barber, Tailor, Sweeper, Watchman
etc.
7. Persons involved in IP and OP care: Ambulance driver, Ambulance cleaner.
Cost of manpower (different categories) at different bedded hospitals:
30
bedded
CH
50
bedded
CH
100
bedded
AH
200
bedded
DH
250
bedded
DH
300+
bedded
DH
50
bedded
PEH
100
bedde
d
MCH
50
bedded
MCH
Nursing cost per day (Rs.)
1246.5
4
1992.0
2
5124.0
4
10135.
4
12568.9
4
15917.7
1
2052.4
8
4425.5 2184.0
Cost of laboratory staff per day (Rs.)
223.27 338.37 967.21 1919.0 2182.1 2182.18 338.27 760.87 422.5
Cost of staffs engaged in X-ray type test (Rs.)
215.58 215.58 383.85 768.8 768.75 768.75 215.58 215.58 215.58
Cost of clerical staffs involved in IP and OP care (Rs.)
99.33 229.23 1535 2572 3129.52 3629.52 229.23 756.54 190.97
22

Persons indirectly involved in IP care (Rs.)
865.38 1226 2019.2
3
2452 2812.5 3533.65 649.04 1514.4 793.27
Persons involved in operation theatre (Rs.)
0 0 0 252.4 252.4 336.54 0 168.27 160.87
Persons involved in IP and OP care (Rs.) (Mostly ambulance)
160.87 160.87 249.62 338.37 338.37 338.37 160.87 160.87 160.87
Appendix II: Average cost of space occupied (per bed) for secondary level hospitals
Bedded
hosp.
Cost of
the bld.
(in lacs)
Life
expect-
ancy
Space
occupie
d (sq ft)
Cost per
sq.
ft.20yrs
(Rs).
Cost per
sq. ft.
per Yr.
Cost per
sq. ft.
per day
(Rs.)
Cost per
400sq. ft
per day
(Rs.)
30 CH 9.92 20 12000 82.67 4.13 0.0113 4.53
50 CH 13.73 20 20000 68.65 3.43 0.0094 3.76
100 AH 39.58 20 40000 98.95 4.95 0.0136 5.42
200 DH 69.90 20 80000 87.38 4.37 0.0119 4.79
250 DH 79.51 20 100000 79.51 3.98 0.0109 4.36
300 DH 92.40 20 120000 77.00 3.85 0.0105 4.22
350+ DH 92.40 20 140000 66.00 3.30 0.0090 3.62
50 PED 13.44 20 20000 67.20 3.36 0.0092 3.68
50 MCH 15.66 20 20000 78.30 3.92 0.0107 4.29
100 MCH 31.41 20 40000 78.53 3.93 0.0107 4.3
Appendix 3: Average cost (Rs.) of laboratory equipments per unit of time
Cost per unit of time Community
hospitals
Area
hospitals
District
hospitals
Cost per hour 1.44 4.18 7.68
Cost of eqpt. Used for level I test (10 minutes) 0.24 0.9 1.28
Cost of eqpt. For level II test (20 minutes) 0.48 1.39 2.52
Cost of eqpt. for X-ray type test (20 minutes) 3.88 9.82 14.73
Cost of equipment for Ultra sound (20
minutes)
0 11.42 10.27
23

Appendix 4: Average cost (Rs.) of specialists' equipment time (in hours, Life expectance
5 years)
Department Cost of equipment
time (per hour)
Medicine 7.37
AMC 3.95
Cardiology 3.94
Pediatrics 0.02
ENT 0.03
Neurosurgery 7.38
Cardiothorasic surgery 3.94
Ophthalmology 0.11
Traumatology 3.95
Plastic surgery 0.01
Obst. and gynecology 0.4
Paying cubicals 0.01
Post operative surgery 3.95
Appendix 5: The recurrent cost components (except drugs and therapeutics) for
hospitals (Expenditure estimates for 14000 beds)
Recurrent cost components Total cost (Rs. millions)
per year for 14000 beds
Contingency account (For soaps,
disinfectants etc.)
0.7
Diet (patient food / drinks) 19.9
Toilet maintenance and supplies 1.8
Stationary for hospitals 4.6
Electric power and water bills 4.6
Night duty meal allowance for MOs 0.2
General fuel 1.1
Hospital POL and servicing 4.4
Incinerator fuel / power 0.7
Library materials and journals 0.58
Telephone bills for hospitals 0.9
Telephone bills for consultants 1.1
Total 2.0
Appendix 6: Cost of various services produced by tertiary level health infrastructure
Per bed/
Day
Per Op
Contact
Lvel I
test
Level II
test
X-Ray
(20 mts)
Ultra
Sound
CT Scan
(1 Hr)
Staffs Including Doctors 17.61 17.61 17.61
Machinary Cost 33.16 10.27 342.47
Operational Cost 30.00 10.00 500.00
Total 80.77 37.88 860.08
25

Per bed/
Day
Per Op
Contact
Lvel I
test
Level II
test
X-Ray
(20 mts)
Ultra
Sound
CT Scan
(1 Hr)
Radiology Dept (OP)
Staffs Other Than Doctors 17.61
Machinary cost 15.75
Operational Cost 30.00
Total 63.36
Biochemiestry Department
Staffs Including Doctors 26.31
Machinary Cost 1.42
Total 37.73
Microbiology Department
Machinary Cost 49.57
Total 78.24
Serology Department
Machinary Cost 24.54
Total 47.68
Clinical Pathology
Machinary Cost 9.08
Total 27.22
Blood Bank
Machinary Cost 1.28
Total Cost 14.29
Medicine
Staffs Other Than Doctor 24.39 0.68
Staffs other than involved in direct
care 14.75 0.39
Building Space 16.44
Furnishing and Other Eqpt. 3.38
Generator and Lifts 0.01 0.00
Other Electrical Equipments 0.32 0.00
Minor Equipment and Furnishing 0.038 0.00
Furnishing and Other Hosp. (OP) 0.00 0.16
26

Per bed/
Day
Per Op
Contact
Lvel I
test
Level II
test
X-Ray
(20 mts)
Ultra
Sound
CT Scan
(1 Hr)
Total 59.29 1.23
Acute Medical Care
care 14.75 0.39
Building Space 16.44 0.00
Furnishing and Other Eqpt 16.49
Total 142.26 2.63
Neurology
care 14.75 0.39
Minor Equipment and Furnishing 0.04
Total 57.66 1.20
Cardiology
care 14.75 0.39
Total 73.86 1.53
Dermatology
care 14.75 0.39
27

Per bed/
Day
Per Op
Contact
Lvel I
test
Level II
test
X-Ray
(20 mts)
Ultra
Sound
CT Scan
(1 Hr)
Total 39.60 13.68
STD
care 14.75 0.39
Total 165.60 4.20
GE
care 14.75 0.39
Total 94.63 2.22
Pediatrics
care 14.75 0.39
Total 48.45 0.96
Surgical
care 14.75 0.39
28

Per bed/
Day
Per Op
Contact
Lvel I
test
Level II
test
X-Ray
(20 mts)
Ultra
Sound
CT Scan
(1 Hr)
Total 66.05 1.44
Orthopedics
care 14.75 0.39
Total 70.47 1.57
Urology
care 14.75 0.39
Furnishing and Other Eqpt. 2.31 0.00
Total 91.61 2.22
ENT
care 14.75 0.39
Total 93.28 2.19
Neuro-surgery
care 14.75 0.39
29

Per bed/
Day
Per Op
Contact
Lvel I
test
Level II
test
X-Ray
(20 mts)
Ultra
Sound
CT Scan
(1 Hr)
Total 79.12 1.64
Cardiothorasic
care 14.75 0.39
Total 73.22 1.52
Pediatric Surgery
care 14.75 0.39
Total 78.76 1.79
Dental
care 14.75 0.39
Total 301.94 15.48
Opthalmalogy
30

Per bed/
Day
Per Op
Contact
Lvel I
test
Level II
test
X-Ray
(20 mts)
Ultra
Sound
CT Scan
(1 Hr)
care 14.75 0.39
Total 168.49 4.28
Traumatology
care 14.75 0.39
Total 133.33 0.55
Plastic Surgery
care 14.75 0.39
Total 89.57 2.10
Obstetrics & Gynecology
care 14.75 0.39
31

Per bed/
Day
Per Op
Contact
Lvel I
test
Level II
test
X-Ray
(20 mts)
Ultra
Sound
CT Scan
(1 Hr)
Total 50.80 1.02
Family Planning
care 14.75 0.39
Total 46.48 0.90
Paying Cubicles
Staffs Other Than Doctor 74.44
care 15.14
Generator and Lifts 0.01
Other Electrical Equipments 0.32
Furnishing and Other Hosp. (OP) 0.00
Total 109.01
Endocrinology
care 14.75 0.39
Total 100.01 2.40
Nephrology
care 14.75 0.39
32

Per bed/
Day
Per Op
Contact
Lvel I
test
Level II
test
X-Ray
(20 mts)
Ultra
Sound
CT Scan
(1 Hr)
Total 114.93 2.78
Causality (one day Time)
Staffs Including the Doctor 2241.83
Generator and Lifts 0.01
Other Electrical Equipments 0.32
Total 2262.01
Post Operative Surgery
ICCU
Staffs Other Than Doctor 127.31
care
Building Space
Furnishing and Other Eqpt.
Generator and Lifts
Other Electrical Equipments
Minor Equipment and Furnishing
Furnishing and Other Hosp. (OP)
Appendix 2:
Typical course of
events
flow diagram for
active screening and
treatment of cervix cancer
33
One million population
Persons not covered by this intervention 778684 All women 20-54 Yrs (221316) taken up for screening
Pap smear
Normal and inflammatory smears (214201) Dysplasia (7115)
3558
Mild (3558)
Antibiotic therapy
Normal (1779) Persisting dysplasia (1779)
Moderate to
severe (5336)
Punch biopsy
CIN 1 & 2 (4345) Carcinoma in situ (CIN 3) (320) Invasive carcinoma (50)
Conisation
(2566)
Hysterectomy
(1778)
Conisation
(142)
Hysterectomy
(159)
Radiotherapy
(18+44=62)
Conisation
with frozom
control (179)
Radical
hysterectom
y (370)
Follow up radiotherapy (71+80+90+185=426

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